Non-Institutional Investors (NII / HNI): IPO Allotment Rules
Introduction
Non-Institutional Investors (often referred to as NII or HNI – High Net Worth Individuals) form a distinct category in the IPO allotment process. SEBI has prescribed specific rules for how shares are allotted to this group when an issue is oversubscribed or undersubscribed.
This article explains how NII/HNI allotment works, how it differs from retail, and what every NII applicant should know before applying.
What Is a Non-Institutional Investor (NII / HNI)?
A Non-Institutional Investor (NII) is an individual investor whose application amount exceeds ₹2,00,000, but who does not fall under the institutional category.
Important points:
- NII investors typically include HNI individuals
- NII category is separate from Retail (RII) and QIB
- Demand and allotment are treated independently for this category
Reservation of Shares for NII Category
IPO issues allocate a specific portion of shares to different categories.
- Reserved Retail quota (e.g., 35% of issue)
- Reserved portion for NII investors
- Reserved portion for QIBs
Each category gets a defined quota, and oversubscription is evaluated within the category, not across categories.
How NII Allotment Is Calculated
Unlike retail investors, NII allotment typically uses proportionate allotment when oversubscribed.
In an oversubscription:
- Available NII shares are compared with total valid demand
- Each applicant is allotted shares based on the ratio of their bid to total demand
This means larger bids receive proportionately larger allotments, subject to rounding rules.
Proportionate Calculation Method
In a proportionate allotment, each applicant gets shares based on the proportion of their valid bid to total valid bids in NII.
- Final allotment depends on registrar rounding rules
- Exact proportional allotment is not guaranteed
For example, an investor bidding for 10% of total demand may receive less due to rounding constraints.
When NII Allotment Is Not Proportionate
There are situations where NII allotment may not strictly follow proportionate logic.
- If demand is less than or equal to available shares, full allotment is given
- If cut-off bids are prioritized based on demand patterns
In all cases, allotment follows SEBI regulations, not discretionary decisions.
NII vs Retail Allotment
- Retail allotment uses lottery in oversubscription
- NII allotment uses proportionate method
- Retail is capped at ₹2,00,000; NII is above this limit
Validity and Compliance Rules
For NII applications to be considered valid:
- PAN must be valid and unique
- Demat account details must be correct
- Bid amount must exceed ₹2,00,000
- ASBA details must be accurate
Does Applying for More Lots Help?
Not necessarily. Allotment depends on the ratio of valid bid to category demand, not application timing or amount alone.
Key Takeaways
- NII/HNI allotment follows proportionate method in oversubscription
- Allotment depends on category-wise demand ratios
- Rounding rules may affect final shares allotted
- Only registrar’s basis of allotment is final